The U.S. Supreme Court recently issued its ruling in the closely watched Consumer Financial Protection Bureau (CFPB) v. Community Financial Services Association of America (CFSA) case, which challenged the CFPB’s independent funding mechanism through the Federal Reserve. The American Financial Services Association, along with other trade groups, participated in an amicus brief arguing that the Bureau’s “funding scheme is historically unique.”
Bill Himpler, President and CEO of AFSA, released a statement following the decision: “While there may be CFPB staff breathing a sigh of relief over this ruling, this Supreme Court decision does nothing to bring clarity or transparency for consumers, the consumer credit marketplace or Congressional oversight. The result may well be continued confusion over unclear CFPB guidance, ongoing uncertainty with rulemaking by blog post and selective enforcement actions, and an agency not bound by robust congressional oversight. We remain committed to work with Congress, the Biden administration and the CFPB on clear policies and a regulatory process that both protects consumers and their access to the credit products to meet their financial needs.”
The case originated in 2018 when a rule governing the payday lending industry was contested. The constitutionality of the Bureau’s unique funding process was questioned in CFPB v. CFSA.
A federal appeals court held that while the rule complied with the Administrative Procedures Act, the funding mechanism for the CFPB violated the Constitution. The Biden administration sought an opinion from the Supreme Court after expressing concerns about potential implications for "the entire financial industry" if they allowed lower court's decision to stand.
AFSA argued that CFPB's funding structure - free from congressional oversight and budgetary process - was unconstitutional. They noted that while other agencies draw funding from other entities (Office of the Comptroller of the Currency, Federal Deposit Insurance Commission), none combine such autonomy with extensive authority like that given to CFPB.
However, a majority of justices disagreed. Despite this, concerns persist about the CFPB's regulatory issues and uneven oversight. For instance, the CFPB is permitted to supervise companies that it deems "pose risk to consumers," but it has not defined what "risk" means.
AFSA and its members advocate for greater congressional oversight of the CFPB to address these issues. They also express a desire to collaborate with the agency in developing regulations that protect consumers while ensuring they have credit choices and providing clear guidelines for lenders.
AFSA members have operated under a set of consumer credit protections for many years, which they believe can inform clear rules when necessary. These protections include: Consumer Confidence, The Right Price, Clarity and Certainty, and Privacy and Security.
The CFPB can create reasonable and clear rules that protect consumers' access to credit, which is vital for financial stability and economic mobility - goals that AFSA seeks to promote daily.
More information about AFSA’s views on consumer protections and ensuring access to credit can be found at www.CaseforCredit.com.